Bangkok Expressway

Bangkok Expressway Plc (BECL)
In line with estimate: BECL posted a 1Q12 net profit of Bt410m, down 24% YoY but up 141% QoQ. Stripping out gains on investments and on sales of investment properties of Bt3m, 1Q12 core profit would be Bt407m, down by 4% YoY but up 128% QoQ. The result was in line with our estimate, but 6% above the consensus.
Results highlights: The key reason for the YoY earnings contraction was the full-quarter effect of higher proportionate revenue-sharing in 1Q12 versus only one month in 1Q11 (as stipulated in BECL’s contract with the Expressway Authority of Thailand), starting March 1, 2011, despite higher traffic (BECL’s average daily traffic volume rose 6% YoY to 1,037,037 vehicles, while NECL’s mean daily traffic volume increased 11% YoY to 63,120 vehicles). However, its effective tax rate dropped to 22.4% in 1Q12 from 30.2% in 1Q11.
The key drivers of the strong QoQ earnings growth were: 1) a traffic rebound with the end of the flooding (BECL’s average daily traffic volume rose 7% QoQ, NECL’s surged 61% YoY), 2) normalized SG&A expenses—the SG&A/sales ratio declined to 21.8% in 1Q12 from 24.0% in 4Q11, and 3) a lower effective tax rate (26% in 4Q11).
Outlook: 2Q12 core profit is expected to soften QoQ, due to seasonality—mean daily traffic volume (BECL and NECL) in April 2012 rose 6% YoY but declined 8% from the 1Q12 mean. However, the bottom-line should grow robustly, both YoY and QoQ, driven by the extra gain from BECL divesting its stake in South East Asia Energy Ltd (SEAN).
What’s changed? Our FY12 profit forecast stands at Bt2,730m, up 94% YoY, driven by traffic growth, an expansive contribution from its power business holding and an extra gain from selling its stake in SEAN. 
Recommendation: Expectations of strong earnings growth in 2Q12 (together with the hefty FY12 core profit expansion outlook of 35% YoY) will act as a share price catalyst going forward. In addition, there would be scope for upside to our forecast if traffic growth were to exceed our estimate of 5%.
The stock currently trades at an FY12 PER of 6.7x and a YE12 PBV of 0.9x, discounts to its respective long-term averages of 10.6x and 0.94x. Moreover, the FY12 dividend yield of 8.6% will support the share price. We maintain our BUY rating.